Self-Study

Methods of Business Valuations

Tuesday, May 1, 2018 – Tuesday, April 30, 2019

This CPE course examines the process of business valuation and factors that influence the value of a business. It explores the three basic methods of valuing business. Asset based valuation is calculated by book value, replacement value, and break-up/net realisable value. Earnings based valuations rely primarily on the P/E valuation method. Cash flow valuation uses the dividend valuation model (DVM) theory and the discounted cash flow (DCF) method. The course also explores the risk adjusted cost of capital equation, the capital asset pricing model (CAPM), and the efficient market hypothesis (EMH).

Objectives

Calculate the value of a whole entity (quoted or unquoted), a subsidiary entity or division using a range of methods including taxation

Capital asset pricing model (CAPM), including the meaning and derivation of the component and, the ability to gear and un-gear betas

Calculation of an appropriate cost of capital for use in discounted cash flow analysis by reference to the nature of the transaction, including use of CAPM, dividend valuation model and MM WACC formula

Efficient market hypothesis and its relevance for the valuation of quoted entities

Impact of government incentives on entity value

Strengths and weaknesses of each valuation method

Validity of the results for use in decision making according to the nature of the target entity